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We are focused on helping investors achieve their goals, and above all help them acquire their next investment property. We aim to help setup a systematic approach to reducing debt and building wealth. Ultimately our goal is to help you purchase the perfect property, at the right time, at the best possible price."

In tonight’s webinar, I’m going to identify potential risks with property investing and how investors like yourself can manage them. With any type of investment comes risk and your level of comfort with risk will usually depend on factors such as your age, financial situation and personal circumstances at the time. For example, if you’re an investor coming close to retirement your more than likely going to play it more safe then a younger investor who is planning for retirement in 20-30 years time.

Finding a good property manager – get referrals, note the first impression – are they well spoken? Note how they come across to you will likely be the same impression they will have on potential tenants, are they on time? have a look at current & past rental advertisings they have, how long have then or were they on the market? Ask questions like how do they advertise, where do they advertise, do they put up any signs in front of the property, what’s the average length it takes them to place a tenant, how big is their team, have a look at their website and see how easy it is to use as your potential tenants will be using the site to find your property.

While most tenants may be reliable there will be some who will not pay their rent on time, not look after your property and cause damages as well. So it’s important that you consider the following tips before buying into an area with the plans of renting out your property.

For brand new properties, make sure you get a building inspector to inspect the property before you complete the final handover. An investment of a couple of hundred dollars can save you thousands of dollars and time later down the track. If you get pest problem such as termites this can become a very expensive problem to deal with. Finding out if they exist before you purchase a property will save you a lot of heartache later on.

Flood & bush fire reports available through local council. If you are buying in a location such as Far North QLD where it’s prone to cyclones then make sure the property is built to cyclone codes.

Contents – as a landlord you only need to insure for items you own the come with the property. Don’t need to have cover to include the tenant’s contents. Building Insurance – fire, storm & flood. Make sure you read the fine print in terms of what your insurer defines as a flood. Some might not cover flooding from rivers bursting their banks. If you’re part of a strata, check with the Body Corporate the level of building insurance that is covered. Income protection usually covers up to 75% of your income.

The debt to equity ratio is determined by the purchase price & borrowing amount, the more distance you place between what is owed & what it’s worth the better off you’ll be. The lower your loan balance, the lower your risk will be when it comes to be able to meet all your loan repayments if interest rates go up. Let’s say you own a property worth $500,000 and you owe $200,000 on your mortgage, your equity is $300,000. Therefore your debt-to-equity ratio is 40/60 as your debt is 40% of the value of your property.

Having a fixed interest rate does have benefits because you know exactly how much you will be repaying for a specific period of time.

RBA has not lifted rates but due to APRA, banks have increased rates anyway.

Look for areas with land supply shortages, increasing populations, increasing average wages, close to good schools, transport infrastructure and amenities. When these things are all combined this will ensure there is increased chance of upward pressure on property values due to demand. With properties spread over a number of locations, it reduces your risk to a single market and your entire portfolio dropping in value if the suburb falls. Other properties in your portfolio may be able to support you long enough for a recovery.

Even worse capital growth goes backwards.

INSERT PROPERTY ANALYSER

Based on how comfortable you are with risk can help you determine what kind of property is going to be right for you and your portfolio.

[On-Demand Webinar] Top 10 Risks of Property Investing and how to Avoid Them

1.
Top 10 Risks of Property Investing
and How to Avoid Them

2.
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4.
Material contained in this presentation is an overview only. It should not
be considered as a comprehensive statement on any matter nor relied
upon as such.
This presentation contains general information only and does not take into
account your personal objectives, financial situation or needs and you
should consider whether the information is appropriate to you before
acting on it.
Before acting on any information you should consider seeking advice from
a financial adviser and your accountant before making any financial
decision in relation to any matters discussed in this presentation.
General advice disclaimer

13.
Tips to avoid risk
• Research the suburb demographic, who are
your likely tenants?
• Engage in reputable property managers who
will ensure your property is properly
managed & thorough background checks are
completed.
• Invest and maintain the right landlord
insurance policy.
• Invest in the middle of the market, more
likely to attract good tenants who are
responsible and will look after your property.
Risk 2: Bad Tenants
Finding the right tenant for your investment property can be difficult
in some situations.

14.
Risk 3: Maintenance Issues
Investing in a property where it requires constant maintenance
can cost you thousands.
Tips to avoid risk
• Engage in reputable builders and tradesmen – check their history, reviews,
licence, insurance & registration.
• Make sure you do a Building & Pest Inspection.
• Have the right insurance.

16.
Risk 5: Unforeseen costs
Can be expensive and you may not have enough set
aside for unexpected costs.
Tips to avoid risk
• Landlord Insurance – cover loss of rent & damages from
tenant.
• Contents Insurance – covers items inside the property.
• Building Insurance – covers unexpected events that damage
your building.
• Income Protection – covers you if you are unable to work for a
period of time due to illness or injury.
• Life Insurance – cover mortgage repayments in case of death.

18.
Tips to avoid risk
• Consider fixing your interest rate.
• Keep your portfolio to a size that you can
maintain and not be forced to sell off any if
repayments increase.
• Maintain a balanced portfolio where you have
positively geared properties that can cover all
their own loan repayments and expenses.
Risk 7: Interest Rate Rises
Will increase your mortgage repayments whether you pay
Interest only or Principal & Interest. Rates will eventually
increase.

19.
Tips to avoid risk
• Will you need cash in the short term? If so,
property may not be the best investment.
• Property investing is long term and investors
are forced to hold asset longer to be able to
make a significant gain.
• Speak to a qualified financial expert.
Risk 8: Liquidity
Is the ease of being able to gain access to the money you have within an
investment. More difficult to get your money out compared to other
investments such as shares.

20.
Risk 9: Property drops in value
Property is worth less than what you paid and you can’t even sell
it to cover the loan repayment.
Tips to avoid risk
• Research target suburb and ensure it has shown there are signs of future
capital growth.
• Diversify portfolio across multiple locations and markets.

21.
Risk 10: Buying the wrong property
Can lead to negative cash flow as well as little or no capital
growth.
Tips to avoid risk
• Research, research and more research!
• Focus on the numbers.
• Don’t buy on emotion.
• Seek help and assistance.

33.
Strategy – Renovations
Pros
• With the right changes, can
create significant equity uplift
over a short period of time
• Increase rental income after
renovation
• Renovate an existing property
– smaller investment required
than buying a new property
Cons
• Can be costly – unforeseen
issues can arise
• For DIY investors with no
experience, costs can blow
out
• Time consuming
• If renovation takes longer than
expected, holding costs &
missed rent will have a
negative impact on return
• No guarantee on return –
equity uplift or rental

35.
Strategy – Subdivisions
Pros
• Can create substantial
equity or cash over a
short period of time
• Take advantage of under
utilised land
• Sell one block & keep the
other - loan could be fully
or nearly paid off
Cons
• Can be costly
• Council regulations &
restrictions
• No guarantee on return
• Time consuming
• Reduced space – may
not be as appealing to
buyers

36.
Strategy – Subdivisions
NORMAN PARK, QLD
• Purchase Price - $875,000 on March 2013 for 810m2 block
• Sold Price after subdividing 1 lot into 2 lots & building new houses:
• Lot 1 (5 bed, 3 bath house on 405m2) – sold $1,310,000 in April 2014
• Lot 2 (5 bed, 3 bath house on 405m2) – sold $1,335,000 in June 2014; then sold
again for $1,423,000 in Nov 2015

37.
What type of investor are you?
Pros
• Save you money
• It can be a huge amount
of fun
• You have the opportunity
to buy below market value
• You can time the market
• You have access to every
property in New Zealand
• It can become a passion
for you
• Learning experience
Cons
• You can make mistakes
• Each mistake can cost you
time & money
• It can be time consuming
• It can be mentally &
emotionally draining
• You only get access to on
market listings
• You’re not in the industry
on a day to day basis
• More likely to buy in boom
& bust areas
• More likely to invest with
your heart than your head
DIY Investing

38.
What type of investor are you?
Hands Off Investing
Pros
• Save you time
• Develop a property
investment strategy
• Experts look out for your best
interests
• Research & experience can
save you money
• Work inside the industry
every day
• Make buying property simple
& stress free
• Deal with real estate agents,
developers & builders on your
behalf
• Access to off market
opportunities
Cons
• High fees (buyers agents
generally charge 2-3% of
purchase price) +
engagement fee
• Can be expensive, charge
you for every property you
purchase
• Some buyers agents won’t
let you have a say in what
you purchase
• Some buyers agents are
actually property marketers
• Some property educators
teach you the theory but
you won’t put it into action